The Eastern District of Texas has been operating at a breakneck pace over the last month: four patent trials have gone to a verdict, with three resulting in plaintiff wins; and the CSIRO cases settled mid-trial.

Of the four trials to play out recently, Texas-based McKool Smith was involved in three and won two.

The firm’s most recent victory, for i4i, a small software firm based in Toronto, Canada, came on Wednesday, and it was massive: a $200 million willfull infringement verdict against Microsoft, a favorite target of competing software makers (such as i4i) and patent trolls alike.

"I feel great," McKool Smith partner Doug Cawley, i4i’s lead trial lawyer, told The Prior Art. Cawley says that, prior to the verdict, i4i officials were "understandably nervous about whether an American jury would be willing to grant a verdict for a Canadian company." They got their answer when the jury—after deliberating for about three hours—came back with the answer they wanted.

I4i, which stands for "Infrastructures for Information," markets various software products geared toward pharmaceutical and health care companies, as well as a product called x4o, which enables an XML editing feature in Microsoft Word. That product, priced at $249 and covered by the patent-in-suit, No. 5,787,449, became a lot less valuable to i4i when Microsoft installed its own XML editing features in Word 2003.

The jury's award was at the low end of a high, yet narrow range—$200 million to $207 million—suggested by i4i's expert witness. That range was calculated by multiplying a rather high royalty rate of $98 times the small fraction of Microsoft Word users—just 1.8 million—that i4i estimated had used Word to edit XML.

While disputing that the software giant had infringed the Canadian company’s patent, Cawley says, Microsoft’s expert witnesses argued that the jury should award damages in the $2–$5 million range if it found that there had indeed been infringement. Microsoft plans to appeal the verdict, according to Bloomberg.

Cawley says that i4i demonstrated its product to Microsoft in 2001. Instead of buying it, i4i contended, Microsoft proceeded to simply incorporate a similar function of its own (i4i did not accuse Microsoft of copying its code or product).

What does Cawley think won the case for i4i? "Probably Microsoft's internal e-mails showing they knew about i4i's patent and chose to make i4i's product obsolete," he says.

Key witnesses for the plaintiffs included company founder and named inventor Michel J. M. G. Vulpe, as well as co-inventor Stephen P. Owens.

Microsoft was defended by Matt Powers of Weil, Gotshal and Manges. Powers didn't immediately respond to a request for comment from The Am Law Litigation Daily on Wednesday.

Creative Internet Advertising is a subsidiary of Acacia Research Corp., a large publicly held patent-holding company based in Newport Beach, California. Over the past few years, Acacia has filed patent infringement suits on behalf of dozens of subsidiaries like Creative. (At last count, SEC filings showed more than 70 of these offspring; there may be more, but Acacia stopped listing its litigations last year.) Nearly all of the suits have ended in confidential settlements.

On May 15, a jury in Magistrate Judge John Love's Tyler courtroom ruled that Yahoo's messenger program with IMVironments had infringed Creative Internet Advertising patent No. 6,205,432. The jury awarded damages of $6,625,584; according to Michael Smith. That was the sum sought by the plaintiff, and represents a royalty on the product of about 20 percent.

The patent-in-suit describes a "background advertising system." (Acacia had also named America Online as a defendant in the suit; AOL settled last year.)

In the wake of the verdict, Yahoo may be feeling a little less confident about its prospects for taking infringement suits to trial: SEC documents show that on Monday, Yahoo quietly arranged a confidential settlement with another Acacia outfit, Performance Pricing Inc. That case was one of four additional trials the search company was scheduled to face this year. As previously reported by sibling publication The Recorder, the Creative suit was the first one Yahoo has taken to trial in four years.

Acacia CEO Paul Ryan declined to comment on the victory, and a call to Acacia's outside counsel at The Simon Law Firm (formerly Simon Passante) in St. Louis was not immediately returned. Acacia was represented locally by two E.D. Tex heavyweights: T. John "Johnny" Ward Jr. and Eric Albritton (the two lawyers who sued Troll Tracker blogger Rick Frenkel when he was unmasked in February 2008). Yahoo was represented by San Francisco-based Howrey partner Henry Bunsow, and locally by Otis Carroll of Ireland Carroll & Kelley.

This case is the second TPA is aware of that Acacia has taken to trial in E.D. Texas. In the first, in November 2007, Weil, Gotshal's Powers knocked Acacia's patents out of commission on behalf of Microsoft (a more successful outcome than Powers achieved for Microsoft in the i4i litigation). That case delivered a serious blow to Acacia's business model. The company's stock dropped about 70 percent in the wake of the trial, and has never fully recovered. The stock price
jumped about 20 percent to $5.48 per share shortly after it announced
its victory. By Friday, it was down to $5.11.

Last week, TPA reported on a major lawsuit brought by the ACLU and the Public Patent Foundation (PubPat). The suit, it turns out, was just the third that the six-year-old PubPat has ever filed. The first two, filed a week earlier, on May 6, are interesting in their own right.

Those suits allege "false marking" against Cumberland Packing Corp., which manufactures Sweet’N Low sweetener, and against Iovate Health Science Research, a dietary supplement company that recently ran afoul of the Food and Drug Administration.

The lawsuit against Cumberland includes the remarkable note that the company has continued to stamp a patent number on the Sweet’N Low’s iconic pink packets—even though that patent expired more than 20 years ago. The suit against Iovate claims the company promoted its products as protected by patents ("patented triple-action technology!"), even though those patents read on compositions with high levels of caffeine—compositions that have nothing to do with the products actually marketed by Iovate.

The statute that allows false marking suits is similar to law governing "qui tam" whistleblower suits, in that a victorious plaintiff is required to split any damage award with the government. The statute allows for $500 in damages "per offense," but does not clearly define what qualifies as an “offense,” according to Fish & Richardson partner Brett Johnson. Some judges have interpreted the false marking of an entire product line to constitute a single offense, says Johnson, who recently won a false marking suit against software maker McAfee.

No surprisingly, Dan Ravicher, of PubPat, thinks it's "pretty clear” that the damages should be applied to every packet of Sweet’N Low sold since the patent expired, although he acknowledges that it's within the judge's discretion to decide whether or not $500 is the proper amount. Depending on the outcome, the case could produce a pretty sweet payday for the public interest law group. Ravicher says, though, that the suit isn't about money—it's about protecting the public against misleading patent claims.

"False marking is a harmful thing," says Ravicher. "That's not what I think, that's what Congress thinks. But they don’t have the manpower to enforce it themselves."